Elon Musk says he can cut $2 trillion out of the federal budget. We know he can catch returning booster rockets with iron arms at his SpaceX flight facility in Boca Chica, Texas, so maybe he can.
No one else has done it or even tried to do it.
Did he mean he could cut $2 trillion out of the entire federal budget in one year ― or did he mean to say he could cut $2 trillion out of the “growth in spending over the next 10 years,” as is commonly understood in today’s budget parlance?
A budget “cut” today in Washington is simply a slight, minor, teeny-weeny reduction in spending from what would otherwise be projected as increased spending from the previous year. This is known as “baseline budgeting” ― which should be abolished for its sheer deceitfulness.
Baseline budgeting is an underhanded way to deceive the American public yet again into believing something that simply is not true. Reducing the rate of growth in overall federal spending from 7% per year to 3% is not a “cut” ― more money will be spent in the next year, just not as much as liberals want to spend.
No one has ever made absolute cuts in overall federal spending since the parsimonious presidency of Calvin Coolidge, who did it every year from 1924 to 1929. Coolidge got the Republican Congress to slash absolute federal government spending levels by 40% during his terms in the White House ― a far greater spending reduction than Musk is proposing.
Coolidge and the Republican Congress also cut taxes every year as economic growth spurred by lower government spending and regulation produced tax revenue surpluses, which he then used to pay down national debt by 33% over a six-year time frame.
If there ever was a Golden Age for fiscal sanity in America, it was under “Silent Cal” Coolidge.
Close to 100% of the total of all taxes collected by Washington today will be used to pay for Social Security, Medicare, Medicaid and interest on the national debt. Every other dollar we need to spend on defense and every other remaining federal program has to be borrowed or simply made up out of thin air by the Federal Reserve and put on their expanded balance sheet since there are not enough willing buyers left to buy all of the new debt.
That is not an adult way to manage the nation’s finances.
Just for illustration’s sake, consider the fact that the second largest line item today is interest on national debt at roughly $1 trillion.
Annual federal spending amounts to $6.8 trillion with a deficit of $1.6 trillion.
Imagine interest rates suddenly fall to near zero again, say 0.01%, for a 24-hour period for some unknown reason. If the entire $36 trillion national debt could be refinanced immediately at near-zero rates, then interest costs next year would fall to near zero as well.
About $1 trillion in net interest costs would be saved. Elon Musk would have achieved 50% of his goal.
And the United States of America would still be close to $600 billion short of balancing its budget.
We can all hope and pray this generation’s most brilliant mind can somehow do what no Congress nor president has done since 2001, which is balance the budget. There may be $2 trillion of unnecessary spending in each annual budget, but it would have to include hundreds of billions in reductions in defense spending, Social Security, Medicare and Medicaid, all of which have been unaddressed by both parties since 2001.
The “easiest” way to get to balance is to put annual caps on overall spending to 3% ― and then adjourn Congress for a decade. Come back in 2034 to see if economic growth has generated enough new tax revenue to cover spending at moderated levels then.
Maybe it will and maybe it won’t, but at least Congress will not have passed any more monstrosities such as the Inflation Reduction Act or the Green New Deal.
Musk fired 90% of the workers at Twitter when he bought it. He won’t be able to fire 90% of federal workers and make any appreciable dent in spending because the federal budget today is essentially a pension and health care company spending entitlement money on auto-pilot that pays interest like a bank.
Maybe Elon Musk will use AI and crypto to save America from its financial woes. It will be America’s finest hour of rescue since Apollo 13.
